Why Did Stardust Power Plunge 10.05% Amid Sector Rotation?

On June 17, 2025, Stardust Power experienced a significant drop of 10.05% in pre-market trading, sparking concerns among investors and analysts alike.

Technical analysis reveals that the Relative Strength Index (RSI) for Stardust Power triggered an oversold condition, indicating extreme short-term weakness. This signal typically suggests a potential rebound, but in this case, it likely followed the sharp price drop rather than predicting it. Other technical patterns, such as head-and-shoulders or MACD/KDJ signals, did not trigger, indicating no clear reversal or continuation patterns.

The trading volume of 1.85 million shares, significantly higher than its 30-day average, suggests heavy selling pressure. This high volume could amplify price swings in a low-liquidity environment, making Stardust Power, a small-cap stock, highly sensitive to large trades. The lack of net inflow/outflow data leaves uncertainty, but the sheer volume implies retail panic selling or stop-loss orders being triggered.

Peer comparison shows divergent behavior among related theme stocks, hinting at sector rotation. Winners like BEEM, AXL, and BH.A outperformed, while losers like AREB and ALSN underperformed. This divergence suggests investors are reallocating capital within the theme, favoring perceived safer bets over smaller names like Stardust Power. The drop in Stardust Power may reflect a "sell-off the weak" dynamic as funds rotate to stronger performers.

The hypothesis for the drop includes technical overreaction and liquidity squeeze. The RSI oversold signal may have been a byproduct of the rapid decline, not a cause. High volume on low liquidity could have created a self-fulfilling price crash, as traders exited positions en masse. Additionally, sector rotation away from small-caps may have contributed to the drop, as peers like BH.A and AXL outperformed, indicating capital flowing to larger, more stable names.